“Past performance is not a guarantee of future performance”. This is the disclaimer investment managers give in their recommendations. If there is any one who worries most about this is IMF.

Corona virus has scrambled the textbook economics. The tax revenues are crumbling, central banks are firing shots & trade has collapsed. Increased sovereign debt has long-term consequences & monetary easing may cause undue risk-taking.

In the 3QFY20, Direct Taxes, Custom Duties & Sales Tax changed +11%, -15% & 8% YoY, respectively. On 9MFY20, the these numbers were modest 13%, -7% & 19% YoY, respectively. The dent is severest in April-June.

On the expenditure side, government gets a better grade. Interestingly, Defence budget is down 7% & mark up expenses are up 3%. This is walking the talk. And needs to continue. Given the fall in discount rate, the mark up expenses should be contained & development spending need upped!

So far so good, the budget deficit for 3Q is 1.5% vs 2.3%YoY. Government had performed well. The tax revenues growth was already much lower than IMF’s hopes. Import growth post monetary easing would increase Custom & Sales taxes.

True test again is documentation. Facilitate but don’t cave in.

Balance the books!